“Watch the product life cycle; but more important, watch the market life cycle” — Philip Kotler.
For retail businesses owners, awareness of the Retail Product Life Cycle (PLC) is key to understanding how products evolve from Introduction to obsolescence. The PLC comprises four stages – Introduction, growth, maturity, and eventual decline. This article discusses why and how awareness of the PLC helps retailers make informed decisions about pricing, marketing, and inventory management, ensuring business sustainability.
What is the Retail Product Life Cycle?
The product life cycle is the amount of time a product goes from being introduced into the market until it’s taken off the shelves. The PLC consists of four stages: intro, growth, maturity, and decline.
At each stage, the product experiences different levels of sales and profits.
For example, typewriters are still available for sale.
Even so, this old technology is at the end of its decline phase, with few sales and little demand. Meanwhile, desktop PCs, laptops, smartphones, and tablets are in the growth or maturity phases. Each stage helps determine when, where, and how retailers should invest in a product.
What Happens to A Product at Each Stage of the Life Cycle?
The first stage of a product’s life cycle is the Introduction phase. During this period, a product is newly developed and introduced to the market. Businesses work on establishing branding, building trust, and addressing any initial consumer concerns about quality and use.
Special offers and discounts may be employed to attract consumers, and businesses need to find effective distribution models. Marketing costs can be relatively high, requiring external support by investors.
Following the Introduction stage, a product enters the Growth phase. This is characterized by efforts to increase sales and expand distribution channels. Strategies aim to reach a broader audience and grow market share.
While the focus during the Introduction is on a core group, the Growth stage targets a broader audience. Funding may still come from investors or lenders, but sales revenue increases.
The Maturity stage signifies a well-established product with reduced production and marketing costs for higher profitability. However, there is the challenge of retaining consumer attention in the face of competition.
Tactics such as discounts, new features, and incentives are employed to maintain customer loyalty. Promotions emphasize how the mature product outperforms newer offerings from competitors.
The final stage in the PLC is Decline, where a product naturally reaches the end of its market relevance. It may become obsolete or go out of fashion, requiring strategies to extend its lifespan, like finding new uses or features.
In some cases, discontinuing or selling production rights may be the most viable option. Recognizing when a product has entered this phase is crucial for businesses to make informed decisions about its future.
“A good example of a mature product is Coca-Cola. In order to increase profits at the stage of product maturity, the company resorts to tricks: it expands its product line and enters new markets. As a result, the company’s financial results are growing year by year.” – Konstantin D.
Why Must Retailers Understand the Product Lifecycle?
Recognizing which stage of the PLC a product is in allows managers to tailor their strategies, such as pricing, marketing, and inventory management.
Here are examples that decision-makers will make about individual products, depending on where it is in the lifecycle:
- Introduction Stage: Retailers can stock limited quantities during the introduction stage to avoid overcommitting.
- Maturity Stage: Retailers can maintain stable inventory levels and minimize overstock, reducing carrying costs.
- Introduction Stage: Retailers can set higher initial prices to recoup development and marketing costs.
- Decline Stage: Retailers can implement price reductions to clear out inventory before the product becomes obsolete.
Marketing and Promotion
- Introduction Stage: Retailers can focus on building brand awareness and educating consumers about new products.
- Growth Stage: Retailers can invest in marketing to capitalize on increasing demand.
- Maturity Stage: Retailers can use promotional tactics to maintain market share and customer loyalty.
- Decline Stage: Retailers can employ clearance sales and promotions to sell the remaining inventory.
- Maturity Stage: Retailers can focus on product improvements, offering unique features to stand out from competitors.
- Growth Stage: Retailers can expand distribution channels to reach a wider audience.
- Maturity Stage: Retailers can optimize distribution for efficiency and cost savings.
- Maturity Stage: Retailers can enhance customer service to retain loyal customers as competition increases.
Discontinue or Revitalize
- Decline Stage: Retailers can decide whether to discontinue the product, sell production rights, or revitalize it with new features or uses.
Examples of the Retail Product Lifecycle
Below are four examples of products, along with their respective stages in the product life cycle and explanations for why they are in those stages:
Product Example: Plant-Based Meat Alternatives (e,g., Beyond Meat)
Explanation: Plant-based meat alternatives, like those developed by Beyond Meat and Impossible Foods, are currently in the introduction stage of the product life cycle.
This is the phase where a new approach to meat production is entering the market. Companies are actively promoting these products to raise awareness and target consumers looking for sustainable and ethical food options. Sales are in the early stages, but demand is gradually building as consumers become more conscious of their dietary choices.
The introduction stage for plant-based meat alternatives is marked by educational marketing efforts and an emphasis on their environmental and health benefits. As consumer preferences evolve, these products will evolve accordingly.
Product Example: Electric Cars (Tesla, for instance)
Explanation: Electric cars, like Tesla’s offerings, are in the growth stage of the product life cycle. These vehicles have gained acceptance in the market, and consumer demand is steadily increasing. The momentum is crucial for sustaining business operations, funding further product development, and generating returns on investment.
As the market for electric cars expands, companies benefit from lower per-unit production costs, improved supplier relationships, and optimized distribution networks. However, competition is growing, with many automakers entering the electric vehicle market.
Product Example: Smartphones (e.g., Apple iPhone)
Explanation: Smartphones, exemplified by the Apple iPhone, are in the maturity stage of the product life cycle. The sales growth has leveled off from the rapid growth period. Companies have reduced prices to stay competitive among the growing competition.
They focus on differentiation rather than awareness, enhancing product features, lowering costs, and intensifying distribution.
Smartphones have become established, and while they continue to generate revenue, they face increased competition. Marketing campaigns emphasize differentiation and value rather than creating awareness.
Product Example: Cable TV
Explanation: Cable TV has entered the decline stage of the product life cycle. In recent years, cable TV has experienced a marked decline as online video streaming services such as Netflix and Hulu have gained precedence. Cable TV faces competition from newer technologies and online streaming services.
Its market share is declining, and the technology is becoming less desirable to consumers as they turn to more advanced and flexible entertainment options. Companies may need to innovate, adapt, or explore new markets to extend the product life cycle.
“The Playstation was a phenomenal success story for the company. That product had a ten-year life cycle, which has never been done in this industry.” – Ian Jackson.
The Product Lifecycle: Pros vs. Cons
Informed Strategic Decisions: Retailers can make informed decisions regarding pricing, marketing, and inventory management by aligning their strategies with the specific stage of the product life cycle.
Maximizing Profitability: Awareness of the product life cycle enables retailers to maximize profitability while minimizing losses, ensuring efficient resource allocation.
Customer Satisfaction: Retailers can enhance customer satisfaction by offering appropriate products and services based on where they are in their life cycle.
Competitive Edge: Retailers who grasp the product life cycle can stay agile and competitive by adapting to market changes and consumer demands.
Sustainable Business Growth: Understanding the product life cycle helps retailers plan for product innovations, explore new markets, and maintain long-term relevance, fostering sustainable business growth.
Financial Losses: Retailers who ignore the product life cycle risk financial losses due to poor inventory management, inappropriate pricing, and ineffective marketing strategies.
Customer Dissatisfaction: Neglecting the product life cycle can lead to mismatched product offerings, resulting in customer dissatisfaction.
Missed Opportunities: Retailers may miss opportunities to revitalize products or explore new markets if they fail to recognize where products are in their life cycle.
Increased Competition: Inability to adapt to changing product dynamics can lead to increased competition and loss of market share.
Obsolescence: Retailers may carry obsolete products that no longer meet customer needs, leading to excess inventory and declining sales.
In sum, retail businesses can align their strategies with the specific stage of the product to maximize profitability, minimize losses, and satisfy customer demands.
Understanding the retail product lifecycle can provide valuable strategic intel to retail business owners.
The PLC advises decision-makers when to introduce, grow, mature, or retire a product, ensuring maximum profitability, inventory optimization and customer utility.
When retail decision-makers effectively manage the PLC, they can stay competitive, adapt to market changes, and consistently meet customer needs.
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